Q. My husband and I recently retired. He is 72 and I am 65. With increasing health issues and no long-term care insurance, we worry about what will happen financially when one of us goes to a nursing home. Can the healthy spouse keep the jointly owned house or will it have to be sold when nursing home costs for the ill spouse require money? Will all joint bank accounts have to be depleted? What about the 403(b) of the healthy spouse? Will personal possessions of the nursing home spouse have to be sold to pay the costs?
A. A nursing home stay can quickly deplete retirees’ financial resources to the point of poverty, at which point they may become eligible for Medicaid. There are some ways for spouses to protect some assets before this happens, and that is generally referred to as Medicaid planning, or restructuring assets in an effort to maintain some financial stability for the healthy spouse. You should be aware that certain advance planning techniques for Medicaid are somewhat controversial, with critics claiming that wealthy individuals use them to divert assets and leave the nursing home bills to the government.
That debate aside, if you have substantial assets you may want to hire an attorney who specializes in elder law to help you sort through your options. There is generally a five-year look-back period for Medicaid, meaning that asset transfers within the five previous years of an application can be subject to penalties.
A lot depends on how large of a nest egg you have and on whether you and your husband have heirs for whom you are trying to leave assets after your deaths.
Medicaid has a spousal impoverishment provision that allows spouses to keep up to $117,240 (the maximum for 2014) and a primary home, though the maximum can vary substantially by state. There are also monthly income limits.
Personal property is generally excluded, but retirement accounts such as 403(b) plans can be subject to the limits if distributions haven’t begun, said K. Gabriel Heiser, an attorney and author of books on Medicaid planning.
Heiser has advised some couples who chose to divorce in order to preserve assets, but warns that the division of property must be deemed equitable, though not necessarily 50-50, to the nursing home spouse.
Depending on your state’s laws, you could also be subject to the Medicaid program coming back and placing liens on your property after your spouse dies, said Joseph Karp, an elder-law attorney. That’s why some people have chosen to place their homes in an irrevocable trust, Karp said.
Q. I’ll be 69 in February and have a small Roth IRA with my employer. I work part time and the current statement says I have a little more than $1,000 in the account. My contribution is currently 6 percent and will increase 1 percent annually until I reach 10 percent. I plan to work as long as I can and hopefully, let the funds grow. Do I have to withdraw the funds by a certain age or date?
A. A follow-up conversation revealed your plan is actually a Roth 401(k), and while the contribution schedule increases annually automatically, you can jump ahead to the maximum if you wish. Generally, you can avoid taking required distributions after age 70-1/2 if you are still working for the employer sponsoring your Roth 401(k), and if you leave that job you could explore rolling it into a Roth IRA, which wouldn’t be subject to required distributions.
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